Correlation Between China Longyuan and Markor International

Can any of the company-specific risk be diversified away by investing in both China Longyuan and Markor International at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining China Longyuan and Markor International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between China Longyuan Power and Markor International Home, you can compare the effects of market volatilities on China Longyuan and Markor International and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in China Longyuan with a short position of Markor International. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Longyuan and Markor International.

Diversification Opportunities for China Longyuan and Markor International

0.79

Correlation Coefficient

China Longyuan  Markor International

Poor diversification

The 3 months correlation between China and Markor is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding China Longyuan Power and Markor International Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markor International Home and China Longyuan is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on China Longyuan Power are associated (or correlated) with Markor International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markor International Home has no effect on the direction of China Longyuan i.e., China Longyuan and Markor International go up and down completely randomly.

Pair Corralation between China Longyuan and Markor International

Assuming the 90 days trading horizon China Longyuan is expected to generate 3.74 times less return on investment than Markor International. But when comparing it to its historical volatility, China Longyuan Power is 1.46 times less risky than Markor International. It trades about 0.13 of its potential returns per unit of risk. Markor International Home is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  123.00  in Markor International Home on September 17, 2024 and sell it today you would earn a total of  162.00  from holding Markor International Home or generate 131.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

China Longyuan Power  vs.  Markor International Home

China Longyuan Power

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in China Longyuan Power are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, China Longyuan sustained solid returns over the last few months and may actually be approaching a breakup point.

Markor International Home

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Markor International Home are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Markor International sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with China Longyuan and Markor International

The main advantage of trading using opposite China Longyuan and Markor International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Longyuan position performs unexpectedly, Markor International can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Markor International will offset losses from the drop in Markor International's long position.

The idea behind China Longyuan Power and Markor International Home pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.